According to Chief Executive of the Financial Conduct Authority (FCA), Nikhil Rathi, the regulator has recognised the role Big Tech is playing in finance and plans to engage efficiently with the sector.
In a speech at the Digital Regulation Cooperation Forum (DRCF), of which he is also Chair, Rathi detailed the responses to the FCA’s call for input on Big Tech. The FCA observed that Big Tech can access financial services data through Open Banking, but there are no requirements for this to be shared with the wider industry.
Big Tech firms, notably Apple, Google, Meta and Microsoft, are taking on an increasingly prominent role in payments, with Apple Pay and Google Pay being perhaps two of the most obvious examples. This has been welcomed by some but met with concern by others.
“Big Tech’s growing emergence in financial services has already made life easier for consumers, but it is still unclear how valuable their data will become in financial markets,” the FCA CEO remarked at DRCF.
“That’s why we want to work with Big Tech to examine how their data could be most helpful for financial firms and their customers in future, and to ensure competition evolves effectively.”
The significance of Big Tech is not lost on the FCA. In his speech, Rathi noted that the five biggest companies in the world today are tech companies – Microsoft, Apple, Alphabet (parent company of Google), Amazon and Nvidia – with Meta also a major player.
Recent years have also seen huge advancements in technologies, notably artificial intelligence (AI), which has become an area of interest of the UK, US and now Canadian governments. Meanwhile, Big Tech firms have played a leading role in accelerating AI development.
Rathi continued: “Leading a coordinated and effective effort to make the most of the opportunities of Big Tech – whilst having an open conversation about the risks and what can and cannot be mitigated – will continue to be a priority. We are outcomes focused at the FCA, pro-innovation and technology neutral.”
Data has been the primary subject of concerns around Big Tech, particularly regarding the vast datasets Big Tech firms have access to, including via Open Banking as the FCA noted, and whether or not these corporate giants are sharing this data with smaller companies to the right extent.
Stakeholders and regulators have expressed worry that this may put Big Tech firms at an advantage over smaller competitors and potentially impact antitrust requirements. This has prompted the FCA to launch its own consultation on the issue.
The financial services industry’s views on the issue have now been made clear as the FCA outlines the findings from the consultation. For all the concerns highlighted before the consultation about data asymmetry, most respondents ‘did not identify any immediate harms’ according to Rathi. The FCA has urged firms to remain vigilant, however.
“Data asymmetry may increase,” he said. “Where that data is important in offering financial services, this data asymmetry will reduce competition, leading to reduced innovation and worse outcomes for consumers.
“There is also a risk that Big Tech firms become the primary access channel for retail financial services. This could squeeze out innovation from small players and also discourage the incumbent legacy institutions from continuing to invest.
“With Big Tech now an essential component of the financial services supply chain, there is also the risk that the combination of cloud, data and AI will cement Big Tech’s power in partnerships with firms across financial services and other sectors.”
Safe data sharing will be crucial for further development of the UK finance sector moving forward, Rathi summarised, citing in particular the importance this holds for Open Banking and Open Finance, cultivation of which is a government objective.
The regulator plans to work with the industry to develop use cases for Big Tech in financial services, to explore incentives for data sharing and creation of a level playfield, and to work with the Payments Systems Regulator (PSR) to understand the competition problems posed by digital wallets.
As Big Tech’s role in payments continues to grow, stakeholders are viewing these companies as both competition but also as an opportunity.
NatWest’s Head of Group Payments Strategy & Research, Lee McNabb, for example, shared with Payment Expert his belief that Big Tech needs to be factored into government and regulatory future of payment strategies more.
By addressing Big Tech, the findings of the consultation and committing to work with these giants moving forward, the FCA may be doing just that. On the other hand, with cases such as the Apple-EU antitrust dispute still ongoing, this may be a rocky path for regulators, fintechs, policymakers and other stakeholders to navigate.
